What is UK property really worth? Here are three ways to find out

The-Joker

MacMickster wrote: »

If the government further reduces, or even stops, subsidising rents then rental yields will fall. Likewise if a significant building programme is put in place.

Both of these are happening.

the main one being the government reducing subsidising rents when the Universal credit and total benefit caps come in next year.

DervProf

chewmylegoff wrote: »

the debt is the amount you borrowed.

the interest payable on the debt is relevant not to the debt you have to repay (which is just the capital sum) but to the net yield on your investment.

Exactly, so the statement "rentals will always increase (roughly) in line with inflation, while the mortgage debt is fixed. Well, it obviously reduces if you use the profits to pay down the mortgage." is kind of misleading, unless I'm not interpreting it correctly. It ignores the interest component of the mortgage, which surely must be taken into consideration when weighing up (or discussing) the pros and cons of BTL.

DervProf

Ah, think I`ve got it now.

At any moment in time, what you have to pay the lender back is your debt to that lender. Assuming that you are at least paying the interest component, the debt will be fixed, unless you pay down some of the "debt".

JonnyBravo

The-Joker wrote: »

The best way to measure value is not to use fiat currency. Measure stuff with stuff.

How many barrels of oil or bussels of weat have been worth the same as an average house over the last century. This shows the times when things were under or overvalued. Right now this shows property to be over valued.

Oh, get a grip.
How are you ensuring the "barrels of oil or bussels of weat" (sic) haven't changed in "value"?

If I was selling my house I wouldn't be interested in it's "value" to someone else, I'd want to know what "price" they were going to pay. In sterling. So I could buy other stuff. Not in "bussels of weat" (sic), which are useless to me.

chucknorris

chewmylegoff wrote: »

wow, so it's just like compound interest then?!

LOL, no! If you mean compound interest as applied to a savings account because:

1. The rent rises as a yield based upon the entire property price, yet most (certainly my) properties were bought with a mortgage. Which means that only a smaller percentage of the property price was invested, yet the yield is increased based on the full property price rather than just the original investment.

2. There is no possibility of capital gains on a savings account.

3. Not only is there no capital gains, but the capital gains on a property are on the full value of the property (not jsut the initial investment, deposit + fees etc). Which of course magnifies the return.

chewmylegoff

chucknorris wrote: »

LOL, no! If you mean compound interest as applied to a savings account because:

1. The rent rises as a yield based upon the entire property price, yet most (certainly my) properties were bought with a mortgage. Which means that only a smaller percentage of the property price was invested, yet the yield is increased based on the full property price rather than just the original investment.

2. There is no possibility of capital gains on a savings account.

3. Not only is there no capital gains, but the capital gains on a property are on the full value of the property (not jsut the initial investment, deposit + fees etc). Which of course magnifies the return.

yeah, but none of this is unique to property. you're just describing leverage. property isn't the only investment you can leverage. the good thing about a property investment is that the yield is correlated to inflation - it's not index linked but there is generally a close relationship. "the yield increasing over time" is not a characteristic of a property investment which differentiates it from any other class of investment.

Thrugelmir

chewmylegoff wrote: »

yeah, but none of this is unique to property. you're just describing leverage.

Which is equally is punishing in reverse. As losses compound equally as fast.

Investment is about timing. Not just getting in. But when to exit.

RenovationMan

Thrugelmir wrote: »

Which is equally is punishing in reverse. As losses compound equally as fast.

Investment is about timing. Not just getting in. But when to exit.

Depends what you're investing in and the strategy you are applying. If you are getting into a BTL to use the rent to fund a retirement that will take place in 20 years or more, then it's largely irrelevent over that time scale when you get in and you don't get out until you die.

abaxas

JonnyBravo wrote: »

Oh, get a grip.
How are you ensuring the "barrels of oil or bussels of weat" (sic) haven't changed in "value"?

If I was selling my house I wouldn't be interested in it's "value" to someone else, I'd want to know what "price" they were going to pay. In sterling. So I could buy other stuff. Not in "bussels of weat" (sic), which are useless to me.

He does have a very good point. Our house price 'bubble' is relative to the £. When if you look via other currencies it's crashed more than a crashy thing driven by a top gear hamster.

So to one person they have doubled their money, but to another its halved.

chucknorris

chewmylegoff wrote: »

yeah, but none of this is unique to property. you're just describing leverage. property isn't the only investment you can leverage. the good thing about a property investment is that the yield is correlated to inflation - it's not index linked but there is generally a close relationship. "the yield increasing over time" is not a characteristic of a property investment which differentiates it from any other class of investment.

I agree with you! But I never said that it was unique to property!

Although I must admit that I wouldn't know how to buy shares with a low interest loan, get someone else to pay rent covering the interest (in part or fully) and be able to offset the interest against tax, which is what I like about property investment. But I do appreciate that it isn't for everyone, each to his own.

Right now I am just being risk averse and only investing in pension, savings accounts (reluctantly due to a lack of opportunities elsewhere) and NSI certificates (when they reintroduce them) plus minor amounts in shares for diversity and portfolio balance (ftse trackers only, I know this bit isn't risk averse, but I am only talking small amounts here).